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A Cautionary Tale About Student Loan Debt

Second in a series

Every fall I do college planning workshops for parents of college-bound high school students to help them pay less for college. My goal is to give them the tools and information they need to become smarter consumers of a college education so they can make better choices for themselves and their kids.

After one of my presentations a woman came up to me and told me that she wished someone had giver her or her parents this information when she was in school. She went on to say that even as her daughter was about to graduate from high school she was still struggling to pay off her own student loan debt.

Suddenly, the concept of student loan debt became very real, very fast.

Student loan debt varies widely from student to student, but according to the Project on Student Debt, the average debt load of a Minnesota college grad sits at about $31,734.

Graduating with $31,734 in loans isn’t necessarily the end of a young person’s financial life. But many students go on to get married within a few years of college. What if their new spouse has a similar debt load?

Now they are a young married couple with over $60,000 in student loans to pay off.

After getting married, this young couple might want to buy a house. The median price for a home in the Twin Cities hovers around $250,000. Add a mortgage to the student loans and the household debt load for this theoretical family climbs to over $300,000.

First comes love. Then comes marriage. Then comes the harsh reality of paying the bills for a newborn. The Twin Cities is one of the most expensive markets in the country for infant daycare with the cost of careestimated at over $13,000 a year!

By the time Junior is 4 years old, the annual bill drops to about $10,000, but by then many families on to their second child.

With student loans, a mortgage and now daycare expenses for one or two kids, how can a young family like this get ahead financially?

Fast forward 30 years and your kids may find themselves paying off student loans, credit cards and other debt even as their children are about to start college. And the cycle continues.

Want to learn more about how student loan debt can affect your kids? Check out this fascinating Ted Talk by Adam Carroll: https://youtu.be/PpN8KlnU7Fw

The average undergrad will have over $30,000 in loan debt by the time they walk across the stage. Many of them will go on to pursue careers that require advanced degrees and additional education such as lawyer, doctor, veterinarian, educator, and physical therapist to name just a few.

Student loan debt for young professionals can easily exceed $100,000. In fact, $200k in student loan debit is about average for doctors and other professionals.

Have the talk. You can help your kids avoid this fate by talking to them about what it will take to pay for their education, how much education will be required for their chosen career, and what it will be like to pay off a large student loan. (Here’s a hint: Your student loan payment will be about $110 a month for 10 years for every $10k borrowed. Check out this loan repayment calculator).

Before your student chooses a college sit down with them, discuss the costs, and what they will be expected to pay. You can find out how much a school costs and what your family might be expected to chip in by visiting the Net Price Calculatorfor every school on your list.

Compare state schools to public universities and private colleges. Add up how much debt you will have at each. Come up with a plan to pay for it.

Then ask yourself, “Is it really worth it?”

For more informationabout how to pay less for college, attend one of my live workshopsor contact me directly at 651.379.3935.

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